Terex Ahead of Estimates - Analyst Blog

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Terex Corp. ( TEX ) reported first quarter 2012 adjusted earnings per share ( EPS ) of 29 cents, a stark contrast to the loss per share of 17 cents in the year-ago quarter. The EPS in the reported quarter surpassed the Zacks Consensus Estimate of 23 cents.

Including the impact of a write-down of an acquisition-related note receivable, EPS was 18 cents in the reported quarter. Including the net effect of restructuring costs, loss on early extinguishment of debt and gain from sale of Bucyrus stock, Terex reported a profit per share of 4 cents in the year-ago quarter.

Net sales at Terex increased 45% to $1.82 billion from $1.26 billion in the year-earlier quarter, ahead of the Zacks Consensus Estimate of $1.78 billion. Excluding the impact of the Demag Cranes AG acquisition, net sales increased 16%.

Costs and Margins

Cost of goods sold amounted to $1.5 billion versus $1.1 billion in the year-earlier quarter. Gross profit increased substantially to $330.8 million from $167.2 million in the year-ago quarter. Gross margins expanded an impressive 500 basis points to 18% in the quarter.

Selling, general and administrative expenses increased 51% to $267 million in the quarter. The company reported operating income of $64 million compared with an operating loss of $9.3 million in the year-ago quarter.

Segment Performance

Total revenue at Aerial Work Platforms increased to $513.4 million from $378.2 million in the year-ago quarter. The segment witnessed recovery in the North American rental channels for its aerial work platform products and strong sales in Australia.

The segment's operating income increased substantially to $42.6 million from $5.7 million in the prior-year quarter as a result of increased volumes and pricing, which were somewhat offset by higher input costs.

Net sales at the Construction segment were $363.1 million versus $341.5 million in the year-ago quarter driven by strong truck and component part sales particularly in the developing markets of Russia, Africa and China. However, a lack of government infrastructure spending in North America and Brazil had a negative impact on the Roadbuilding business.

The segment broke even in the quarter. Benefits from cost-saving initiatives and profits accrued in several Construction businesses were offset by losses incurred in the Roadbuilding business. The segment had suffered an operating loss of $3.2 million in the year-earlier quarter

Cranes reported total revenue of $419.4 million versus $398.3 million in the year-earlier quarter, with improvement in demand for rough terrain cranes in North America, robust performance in certain port equipment businesses and strong demand for pick and carry crane products in Australia.

However, Crawler crane sales remained weak in Europe. The segment reported an operating profit of $7.3 million versus an operating loss of $22.5 million in the year-earlier quarter, benefitting from restructuring activities that were taken during 2011, increased volumes and improved product mix. 

Net sales at Material Handling & Port solutions were $367.5 million driven by demand for industrial cranes and mobile harbor cranes. Region-wise, Germany and the United States showed strong performance followed by India and China. The segment reported an operating profit of $2.9 million as a result of strong machine sales, particularly of higher-margin port equipment, as well as spare parts, service and maintenance revenue.

Net sales at the Material Processing segment were $169.2 million, up 11% year over year due to strength in North American markets followed by Australia and Asia-Pacific. However, lower demand in Europe was a minor offset. The segment reported an operating profit of $15.3 million, up from $12.3 million in the prior-year quarter.

Financial Position

As of March 31, 2012, cash and cash equivalents amounted to $973 million versus $774 million as of December 31, 2011. Cash from operating activities was an outflow of $78.5 million during the quarter compared with usage of $76.6 million in the prior-year quarter. The debt-to-capitalization ratio deteriorated to 57% as of March 31, 2012 from 55% as of December 31, 2011.

Outlook

Management expects full-year net sales in the range of $7.5 billion to $8.0 billion. Full-year EPS is projected in the range of $1.65 to $1.85. Operating profit is expected to be between $475 million and $525 million.

Our Take

Terex had been continuously suffering losses since the first quarter of fiscal 2009, affected by the global economic slowdown. However, the company reversed its string of losses in 2011.

The Construction segment had so long been in the red but delivered a break-even quarter this time. With an increase in backlog and order quotation activity in the quarter, we expect the segment to turn profitable.

With the recent Demag acquisition, Terex will add a new product category of industrial cranes and hoists, and become the leading worldwide player in port equipment. The combined entity will have a strong footprint in Europe and the emerging markets, especially in China, as Demag is counting on capturing the growing demand for cranes in that country, the world's largest market for industrial cranes.

North America remains a strong market for Terex for most product categories, with the exception of Roadbuilding products. However, recent weakness in China and Europe remain concerns. We currently have a Zacks #2 Rank (short-term Buy recommendation) on the stock.

Westport, Connecticut-based Terex Corporation is a global manufacturer of a broad range of equipment for the construction, infrastructure, quarrying, mining, shipping, transportation, refining, energy and utility industries.

The company's manufacturing facilities are located in the U.S., Canada, Europe, Australia, Asia and South America. It operates through four business segments: Aerial Work Platforms, Construction, Cranes and Materials Processing. Terex competes with the likes of Caterpillar Inc. ( CAT ), Deere & Company ( DE ) and Komatsu Ltd. ( KMTUY ).


 
CATERPILLAR INC ( CAT ): Free Stock Analysis Report
 
DEERE & CO ( DE ): Free Stock Analysis Report
 
TEREX CORP ( TEX ): Free Stock Analysis Report
 
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Stocks

Referenced Stocks: CAT , DE , EPS , TEX

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